Three Critical Components of a Successful Performance Review

We’ve blogged about splitting the performance evaluation from a discussion about pay raises. We’ve also floated the idea of turning the annual performance review into ongoing discussions about an employee’s performance.  Now it’s time to consider how to provide effective performance reviews

Let’s look at the performance review itself. In our years of working with clients on developing performance evaluations that help to connect the dots from an organization’s strategy to an individual’s behavior, we’ve identified three critical components to a performance review. It needs to cover capabilities, behavior and delivery:

  1. Capabilities – The capabilities component entails the high level view of where the organization is going and how the individual fits in. The organization has a vision of what it’s trying to achieve, it has a strategy, and it has a set of corporate values. At the individual level – and during performance discussions – there should be components that are aligned to the organization’s strategic direction. If the organization’s vision paints a picture of what it will look like in five years, that vision should include a  picture of the capabilities that will be needed in the workforce to drive the organization forward – that is, the knowledge, skills and abilities of its employees. Then, on an annual basis, leaders can have discussions with employees on how the individual is developing the knowledge, skills and abilities that they need to help the organization move forward. Taken this way, the performance review is not about a raise or promotion, but about personal development.
  2. Behavior – Most organizations have a set of values they espouse – things like integrity, customer service, diversity, social responsibility. These values should be driving the behavioral norms within the organization. Companies should ask themselves, “If these are our values, are our people walking the talk?” Part of the performance evaluation should assess if employees are behaving in ways that are consistent with the organization’s values. If not, how does the organization get each individual moving in the right direction? This should be discussed in the performance evaluation.
  3. Delivery – From a strategic perspective, the organization needs to look not just at where it wants to go, but also how it will get there. This is delivery. On an organization-wide level, delivery answers questions like the markets it should be in, the products it offers, its approach to pricing. For an employee, delivery is often the easiest component of an annual review to comprehend. It often takes the form of goals and outlines what a person has to accomplish in the next year. The key to the delivery component of the performance review is to make sure that what an individual is asked to deliver ties directly to the organization’s strategic vision. Is the employee delivering what he/she needs to?

Looking at the performance evaluation in this way – with these three balanced components – creates a different view of the annual review. It’s no longer just an administrative task. Now, it’s a strategic asset. It’s a way for leaders to connect with employees and create the workforce the organization will need to carry out its vision for the future.